Bankruptcy judge approves more than $40 million in Tribune Co. bonuses

Based on the company's projected performance through 2010, actual payout will likely be closer to $30 million, according to court documents

November 10, 2010|By Michael Oneal, Tribune reporter

The judge in Tribune Co.'s bankruptcy case approved more than $40 million in 2010 incentive bonuses for 635 of its operating managers and executives Wednesday.

But based on the company's projected performance through the end of the year, the actual payout will likely be closer to $30 million, according to court documents.

Reacting to objections to the plan, the company also agreed to withhold payments for five top executives who have been identified as potential defendants in legal claims related to Tribune Co.'s 2007 leveraged buyout.

The court did not address what would happen to the bonuses originally slated for former Tribune Co. Chief Executive Randy Michaels, who resigned under pressure on Oct. 22, or the 11 members of his team who also have departed the company. But sources close to the situation said that in Michaels' case at least, an exit package is still being negotiated with the company's board and no determination yet has been made about how his share of the 2010 bonus program would fit in.

At a hearing Wednesday in Delaware, U.S. Bankruptcy Judge Kevin Carey, who already has approved $57 million in management bonuses since the Chicago-based media company filed for Chapter 11 protection on Dec. 8, 2008, said the new request (originally filed in May) was "meaningful but not excessive" in rewarding management performance for 2010.

He noted that Tribune Co., which owns the Chicago Tribune, Los Angeles Times and other media properties, had moved the incentive targets upward and adjusted the payouts downward in response to pressure from creditors in July, making the 2010 program slightly less lucrative for management than the one he approved for 2009.

The 2010 plan gives Tribune Co. managers the opportunity to earn a maximum of $42.9 million in bonuses if they generate $685 million or more in operating cash flow through December, versus $492 million in 2009.

But Eddy Hartenstein, Tribune Co. co-president and publisher of the Los Angeles Times, testified at the hearing that the company is projecting cash flow of $617 million for the year, which would trigger the mid-level bonus payouts under the plan. That level could pay out a total of $33 million to 640 managers, or $4.4 million for Tribune Co.'s top nine executives and $28.2 million for the rest.

How much of that total actually gets paid, however, will depend on what Michaels and his team receive. Also, Tribune Co. has not revealed how much was slated for the five executives who will be denied payments until the potential claims against them are either dropped or resolved in court.

The five executives named in the objection filed by the Official Committee of Unsecured Creditors are Tribune Co. Chief Financial Officer Chandler Bigelow; Daniel Kazan, senior vice president of investments; Harry Amsden, senior vice president of financial operations; Robert Gremillion, executive vice president of Tribune Publishing; and David Williams, chief executive of Tribune Media Services.

The creditors committee and the U.S. Bankruptcy Trustee argued it would be inappropriate to pay these executives from estate funds given that they have been identified as potential defendants in claims raised either by Kenneth Klee, the court-appointed examiner in the case, or the committee, which recently filed two massive complaints related to the buyout.

Tribune Co. on Tuesday issued a statement saying if the five named employees were denied bonuses based on "judicially untested" claims, it would "improperly penalize" them. But in court Wednesday, the company decided to bow to the objections to get the broader bonus plan approved quickly.